San Diego – Otonomyindicates it is cutting jobs and slashing operations in order to stay in business.

On Aug. 30, the company reported that its AVERTS-1 Phase III clinical trial of Otividex in patients with Meniere’s disease had failed to meet its primary endpoint and all key vertigo secondary endpoints. Meniere’s disease is an inner ear disorder that gives patients vertigo, along with fluctuating hearing loss and a progressively, ultimately permanent hearing loss, and ringing of the ears.

The AVERTS-1 trial didn’t hit its primary endpoint, which was the count of definitive vertigo days—the results were similar to those on the placebo. It also didn’t have statistical significance in its secondary vertigo endpoints at month 3.

The company immediately suspended the Otividex clinical trials and pre-registration support efforts. Data will be reviewed and a decision will be made on whether there are other indications it can be developed for. It began laying off about 33 percent of its staff not involved in Otiprio (ciprofloxacin otic suspension) commercial support.

Otonomy also says it will not start any clinical trials before the end of this year, saying that, “Timing for initiation of a Phase II clinical trial of OTO-311 (gacyclidine) in tinnitus patients and a Phase III registration trial for Otiprio in pediatric patients with acute otitis media with tympanostomy tubes (AOMT) will be evaluated as part of the pipeline review and prioritization effort now underway.”

This is expected to immediately save $7 million this year. Total non-GAAP operating expenses are expected to be $73 million to $78 million for 2017, down from previous guidance of $80 million to $85 million, and GAAP operating expenses for the year are expected to be $95 million to $100 million, down from $103 million to $108 million.

All told, it expects its cash burn for 2018 to be less than $45 million, and its current cash balance, which is about $120 million to $125 million at the end of this year, should fund operations into 2020.

“We moved quickly following the disappointing AVERTS-1 trial results to focus our efforts in order to reduce costs,” said David Weber, Otonomy’s president and chief executive officer, in a statement. “I am deeply grateful to the talented individuals dedicated to developing Otividex for the treatment of Meniere’s disease, and we wish the best for those impacted by the workforce reduction. The changes we are making give us the cash runway we need to build shareholder value by focusing on key assets in our product pipeline which we believe is still the broadest in the otology field.”

The company has an action date for the supplemental New Drug Application (sNDA) for acute otitis externa with the U.S. Food and Drug Administration (FDA) of March 2, 2018.